YEAR 11 ACCOUNTING CLASSIFICATION OF ACCOUNTS

REASON OF CLASSIFICATION Each accounting element is further classified into different categories. The reason of classification is to: Give more detailed information in the financial statements

ASSETS Assets are further classified into: CURRENT ASSETS NON CURRENT ASSETS, which are further classified into: Property, Plant and Equipment Intangible Assets Investments

ASSETS Current AssetsNon Current Assets Property, Plant and Equipment Investments Intangible Assets

CURRENT ASSETS Current Assets are assets that: Is Cash OR Can or expected to be turned into cash in the next 12 months (For Example: Accounts Receivable) OR Will be or expected to be used up in the next 12 months (For example: Stationary on Hand).

NON CURRENT ASSETS Non Current Assets are assets other than Current Assets. That means the assets will be retained in the business for more than 12 months

Property, Plant and Equipment Property, Plant and Equipment are tangible assets which will be retained in the business for Property, Plant and Equipment are used: To Produce goods and services (such as Machinery) For business’s administration purpose (such as Office Equipment) For Rental to others (like Property to Rent) more than 12 months.

Investments Investments are investments with using business’s surplus cash. These kinds of investments are usually due: Within 12 months After 12 months

Intangible Assets Intangible Assets are assets which are UNTOUCHABLE but brings in future economic benefit. For example: Goodwill (Business’s reputation) brings in future economic benefit of extra income due to good business’s reputation.

Examples Inventory Cash at Bank Term Deposit (due June 2006) Shares in AIA Ltd (expected to be sold in 2010) Current Assets Investments

Petty Cash Goodwill Delivery Vehicle Furniture and Fittings Computers Trademark Current Assets Intangible Assets Property, Plant and Equipment Intangible Assets

LIABILITIES Liabilities are further classified into: Current Liabilities Non Current Liabilities

Current Liabilities Guess what do we mean by Current Liabilities Current Liabilities are liabilities that are settled or expected to be settled in the next 12 months.

Non Current Liabilities Non-current liability means…. Any liability that is settled or expected to be settled after 12 months.

LIABILITIES Current Liabilities Non Current Liabilities

Examples Accounts Payable Bank Overdraft Loan (due Jan 2007) Mortgage (due Jan 2017) GST Payable Current Liabilities Non Current Liabilities Current Liabilities

Hire Purchase (due Dec 2006) Loan (due Dec 2011) EXAMPLES (cont’d) Current Liabilities Non-Current Liabilities

INCOME Income are classified into the following: Revenue Other Income

Revenue Main source of income for businesses Trading Entity (like Dairy Store) Service Entity (like Health clinic) Sales Fees Received

Other Income Incomes other than Revenue. Examples could be: Interest Received Gain on Sale Commission Received Dividends Received Rent Received

INCOME RevenueOther Income

EXPENSES Expenses are further classified into different categories according to their function. Expenses are further classified into: Distribution Expenses Administration Expenses Financial Costs

Distribution Expenses Distribution expenses are costs incurred in transferring ownership of finished goods to the consumer. Those expenses incurred through the promotion, storage, selling and delivery of the inventory for sale.

Distribution Expenses Example Give us examples of distribution expenses in a florist shop (Refer back to the features of Distribution Expenses)

Administration Expenses Administrative expenses are costs associated with the administration of the entity as a whole.

Examples Give us examples of administration expenses in a florist shop. (Remember, Administration Expenses relates to the administration side of the entity)

Financial Costs Finance costs arise from an entity financing its operations from external sources. (i.e. costs relate to funding from outsiders) Finance Costs are limited to different types of interest paid.

EXPENSES Distribution Expenses Administration Expenses Financial Costs

Examples Advertising Wages (Office workers) Interest on Loan Rent (Shop) Wages (Shop Assistants) Distribution Expenses Admin. Expenses Financial Costs Distribution Expenses

Examples cont’d Interest on Hire Purchase Delivery Truck Expenses Maintenance to Office Equipment Loss on Sale on Shop Equipment Stationery Commission Paid Distribution Expenses Financial Costs Admin Expenses Distribution Expenses Admin Expenses Distribution Expenses